By Bob Feeman | MainStreet.com

First, the reality: There are no magic bullets that can restore your retirement account to where it was before the current economic crisis.

“What it’s worth now is what it’s worth,” says Harold Evensky, a certified financial planner and president of Evensky & Katz, a financial advisory firm in Coral Gables, Fla. “There’s no guarantee you’re going to bounce back.”

Evensky recommends investors start by revisiting and perhaps adjusting their retirement goals. “Maybe you don’t need to bounce back. Perhaps you just need to invest more intelligently and diversify,” he says.

In addition, Evensky suggests that investors proceed cautiously in the current economic environment. “If anyone is discovering the holy grail now, be suspicious. Be careful of some of the new things coming out. Try not to chase the next great thing.”

That said, there are some actions investors can take to maximize their retirement accounts, including the following.

1. Manage expenses: Many individuals or couples, especially those who work for different companies or have changed jobs over the past few years, have multiple retirement accounts, and are paying fees on each of those accounts. Now is the time to consolidate your retirement savings into just one or two accounts to reduce fees and costs. Be sure to compare the costs of your current plans and any new ones you may be considering, and keep an eye out for hard-to-spot administrative fees that can siphon off funds from your account. Also, having fewer accounts can also make them easier to manage when it’s time to start making withdrawals.

2. Diversify your savings: If you employer has stopped matching your 401(k) contributions, this might be a good time to consider diversifying some of your retirement savings to a low-cost IRA — say, one offered by a mutual fund company such as Vanguard. These accounts offer similar tax advantages to 401(k)s, and will give you an opportunity to set up and manage a retirement account separate from your employer, which might prove beneficial if your current plan is costly.

3. Consider a Roth IRA: Younger investors might want to consider moving part of their retirement savings to a Roth IRA. The contributions will come out of after-tax income, but that might prove beneficial in the long run, since the eventual withdrawals will be tax-free, and will likely be taken when an investor’s tax rate is significantly higher.

4. Write off losses: A strategy called “tax loss harvesting” allows you to write off any investment losses you have, but this applies only to taxable investments, and not to traditional retirement investments accounts such as IRAs. However, it can apply to a Roth IRA. Generally, the strategy calls for selling off your investments, taking the loss, and claiming a tax deduction up to $3,000 for the calendar year. If your net loss is more than $3,000, you can carry it forward into the next year. Also, after 30 days, you can repurchase the investment without a penalty.

5. Seek expert advice: Finally, don’t panic. This isn’t the time to stop contributing to your retirement accounts. Remember, any investments you make now are being bought when the market is down, so you actually have more purchasing power than you realize. Many stocks can be had at bargain-basement prices. Seek the help of an expert by visiting a financial planner or CPA, and set realistic goals, build a well-diversified portfolio and hold tight until the market improves.

By MainStreet.com Staff Writers

Knowing how long to keep an important financial document is the key to maintaining your personal security as well as managing clutter. Some documents can be shredded after short periods of time, while others should be kept indefinitely. Here’s a handy guide to help you figure out what to keep and what to shred, beginning with the short-lived documents:

Keep for 45 Days

Keep for One Year

Keep for Seven Years

Keep Permanently

Shred Now

Conditional Documents (Times Vary)

By Althea Chang | MainStreet.com

There’s a long-held belief that investing in a 401(k) is the best way to ensure you’ll have an income throughout retirement . Actually, you may not be able to rely on a 401(k) as your primary source of retirement income.

Many 401(k) contributors may be new to investing and look to fund managers for consistent returns over time. But, as we’ve discovered during this economic downturn, mutual funds aren’t a place where you can just plunk down your money and watch it grow. Plus, the fees you’ll have to pay and the mutual fund choice available to you may limit your returns or even add to your losses.

Placing Blame
“The rub on 401(k) plans is the additional expenses that are affiliated, and depending on the 401(k) that’s offered, the restrictions as far as what funds are offered,” says Timothy MicKey, managing director of Monument Wealth Management. Additionally, some 401(k) “trustees are not on top of things the way they should be,” he says. For example, some mutual funds that were once great investment options may be less so when a specific fund manager is no longer in charge, but 401(k) trustees may fail to update mutual fund choices in response to that. In addition, investors “have to realize that for the last 18 months, diversification did not work. Almost every sector went down,” MicKey notes.

“My biggest fear is that people were overly aggressive and waited before they made any allocation changes,” says MicKey. “People who have been hit the hardest went into very conservative products, not understanding that conservative products would be the next shoe to drop,” he adds.

Missing Pieces
“Many people would have no investments if it was not for their 401(k),” says Kathy Williams, an Oklahoma City-based financial planner.

Retirement savings plans via 401(k)s and IRAs were initially meant to play one part in an individual’s retirement income, supplementing pensions and social security benefits which make up a so-called three-legged stool. However, not all employers offer pensions, and Social Security payouts are facing steep cuts in the next few decades.

“Basically, only government and union employees have pensions now,” says William Driscoll, a Plymouth, Mass.-based certified financial planner. “Many people don’t have the ability to save adequately, so they need to think in terms of a modified lifestyle, not spending up to their income, but less.”

Real estate, for some, has replaced pensions to hold up income during retirement, as investors bought the biggest homes they could afford and flipped them for a profit during retirement. But while Driscoll says this strategy might work if you have 10 to 20 years until retirement, in this housing market, “if you want to flip it in three years and come out with six figures, you can’t really count on that.”

“You get the biggest bang for your buck with individual stock issues, but you can’t go in unless you have a diversified portfolio. You’ve got to have at least 20 companies,” MicKey says, which would require investors to do a great deal of research, which they may not have the time or the will to do.

Diversifying for Safe Savings
A number of investment advisors may be pushing diversified, age-based or target-date mutual funds for those who want to leave asset allocation to a fund manager, but funds that cater to your specific risk tolerance may actually be a better choice.

“I personally don’t like [target date funds] at all,” says MicKey. There’s nowhere in their planning that they take into consideration the economical cycle. “I’m much more an advocate of lifestyle funds … based on risk tolerance, which is a much wiser way to go.”

And while CDs may be a secure investment, “CDs serve a purpose for liquidity needs within a certain period, for example, if a client wants to buy a house within three years, go on a vacation or short term goals, not long-term,” says financial planner Williams. “Generally with the taxes that you have to pay on the interest along with low interest rates, they’re not adequate for long term investing strategies.”

Foreign exchange could increasingly play a part in long-term investing, including investing for and during retirement. “People are more savvy to the fundamentals of major economies of the world,” says Betsy Waters, global director of DBFX, Deutsche Bank’s online foreign exchange trading platform( Stock Quote: DB). Waters notes that most people already have some currency exposure in their retirement portfolios, which may allow them to hedge against other others bets, for example on domestic stocks.

Reconsidering the 401(k)
You may consider a 401(k) a must, however, if your employer matches your contributions, or if you’re lucky, makes contributions whether you do or not.

Since traditional 401(k) contributions are made with pre-tax money, the money you would have spent on taxes is invested. Your earnings are also compounded over time, which allows earnings to become part of your underlying investment.

Before you invest or consider moving your money from one fund to another, you’ll need to look at your investment horizon and risk tolerance. How many years from now do you plan to retire, and how long will you need your money to last?

When you’re looking at individual mutual funds, do your due diligence to make sure the fund is appropriate for your needs by using resources like TheStreet.com Ratings Screener.

Younger people “have a wonderful chance to get ahead of the curve.” Says MicKey. “Now is the time to dump as much as they can afford into [a 401(k)]. But if you’re in your 50s or 60s and you’re concerned about your retirement savings, you may want to meet with a financial advisor to talk about changing your strategy.

By Janet Aschkenasy | MainStreet.com

Did you ever sit through an investment education seminar at work feeling totally dumbfounded? You are not alone.

To make sure your employer’s next 401(k) investment meeting doesn’t go by in a blur, it pays to prepare in advance.

Financial professionals running group meetings will often spend up to 30 minutes or more helping you out individually, after the session concludes. And while you usually won’t get actual “advice,” telling you exactly where your 401(k) contributions should go (unless you or your employer pays for it), one-on-one financial education is frequently provided free of charge in connection with your employer’s group meeting.

Here’s how you can take full advantage:

1. Bring your financial documents. When Ron Bartlett, a financial advisor in Lexington, S.C., runs a company-sponsored investment education meeting, he advises plan participants to bring a balance sheet (a list all of your assets and liabilities), any bank CD statements, a list of company retirement plans (including those from previous employers) and an accounting of outstanding credit card debt.

Also good to have on hand: A list of your monthly mortgage obligations, IRA accounts and other investment statements, life insurance policies, Social Security statements and the value of your home. If possible, bring a copy of your last tax return, says Bartlett, as well as a list of your core financial concerns, the ones that keep you up at night.

The agreement Bartlett Financial has with the company’s broker/dealer, LPL Financial, does not permit advisors to give participants specific investment advice, but “I can supply Morningstar and S&P ratings and reports,” he says. “We have discussions with them of what investment categories they should consider.” All this is free of charge.

2. Locate a copy of your company’s summary plan description (SPD). Wondering whether you can take a loan on your 401(k) and how you need to pay it back? Curious about how long you need to work before you’re permitted to withdraw your employer’s 401(k) match? Everything you want to know is the SPD, observes William Harris, a Certified Financial Planner with WH Cornerstone Investments, in Duxbury, Mass., so it’s good to be familiar with the document before your company seminar. Every employer makes an SPD available to employees, often via the company Web site, Harris says. Check with your human resources department if you need help.

3. Find out what education tools your company offers and use them. Usually, there is an 800 number to call with questions about how your plan contributions are invested and how to make changes and when. Frequently companies also offer ongoing education and interactive services like 401(k) transfer capabilities via their Web site. Beyond that, “We’re seeing a lot of 401(k) providers do questionnaires now on risk tolerance,” says Harris, adding that “It’s gotten so sophisticated that often if you say your risk tolerance is ‘aggressive’ and you’re willing to commit a good amount to stocks, for instance, the plan administrator will offer a program recommending an asset allocation for you and allow you to hit a button and make your menu choices on the spot.”

4. Ask if one-on-one counseling is available. Financial planners are often able to capitalize on company education sessions by capturing one or two participants as personal clients, which is one reason many are happy to speak with you privately at no obligation or cost to you or your employer.

5. Don’t be afraid to ask about fees. Remember that a 401(k) fund may have an internal cost or “expense ratio” for investment management, but also a brokerage commission or “load” (a fee for advisors who get paid for ferreting out the best fund choices). If the fees are too high and your company has no match, it may make sense to open an IRA instead of a 401(k). What’s high? Harris says he’d raise an eyebrow if a bond fund were offered for more than a .75% asset fee, or if an equity fund were charging more than 1.5%, unless it’s for an international or small-cap fund where more research is required from fund companies.

By MainStreet.com Staff Writers

Looking for a gift that keeps on giving? How about an IRA? Although it might not be as hip as a new iPod, an IRA could be the smartest gift you’ve ever given. Buying an IRA for someone you care about is a great way to spark the habit of planning for retirement. At the very least, the money you put in will continue to compound.

An IRA makes a great present for an older student (in high school or college) because the earnings potential is enormous when an account is started early. Don’t you wish your IRA had an extra 10 or 15 years of compound interest behind it? You can only open an IRA for your child if he has a job, however. Contributions to an IRA cannot exceed the earned income of the owner. So, if your kid only makes $2,000 in a year, then that’s the maximum you can contribute to the IRA. An IRA also makes a great gift for a spouse, and it will end up being a gift for you too. If you have maxed out your retirement contribution, you can still contribute to your husband’s or wife’s IRA. It’ll seem really romantic when it turns out you can afford that trip to Paris in retirement.

It’s easy to open an IRA in someone else’s name. You can ask your financial advisor to handle the paperwork, or you can visit a bank, credit union, savings and loan association or another financial institution. Some funds require a large initial contribution, but you can find funds that can be started with as little as $200.

When you open the IRA, you’ll have to choose between a traditional IRA and a Roth IRA. With a traditional IRA, taxes are paid on the back end, when the money is withdrawn. With a Roth IRA, withdrawals are essentially tax-free but contributions are made after tax. If the IRA is for your child, go with a Roth IRA. That way, your loved one will be able to take withdrawals of original contributions without taxes or penalty (earnings can only be withdrawn without taxes after age 59 and a half). Of course, it’s best if the account is allowed to grow untouched until retirement, but it’s nice to have the option. And keep in mind, your kid probably doesn’t make enough money to see any tax savings from a traditional IRA.

Everyone makes their own decisions in life. During such tough times (or even when the economy is going great) it is a hard decision to make regarding whether to work for a corporation or to become self-employed. Often times people need to break free from their daily routines. Last year, an international traveler who had been working for corporations for many years made a decision to become self-employed for the first time in his life. Here are some of his words of wisdom…

What made you become self employed when all of your life you had been working for corporations?

When what you have been doing for a long time isn’t enjoyable any more, and finding a new job in the same industry that will offer the level of interest that you had experienced isn’t an option, working for yourself may provide all that you are looking for.

Did you find that self employment was rewarding?
Yes. However, with a busy schedule the additional work and concerns resulting from being ‘on your own’ was stressful to start. In addition there were concerns that were new to business, detracting from the main role you make for yourself in the self employed owner/operator role.

Can you give me an example of the concerns?

While contracts you may obtain pay their account in full, you are subject to the normal payment schedule assumed by the corporate accounts payable department. This is likely to result in payment of bills after 30 days at the best and as much as ninety days otherwise. You have to make sure that your cash flow accounts for this otherwise you are into taking loans and therefore paying out money not recoverable from the client.

Any other concerns?

Yes…taxes. You have to ‘withhold’ your own tax since the client will not do this for you. He may issue a Form 1099 at the end of the year but you have to have the money reserves to pay the IRS. Don’t think that you should be able to claim much more than you did when you were employed. In fact, as a self employed you have to pay the employment tax that your corporate employer would have paid on your behalf. Therefore instead of paying 6% employment tax you have to pay the full 12%, which makes a big dent in your income.

What about health insurance?

Don’t mention insurance! Anyone working in Massachusetts has to have medical insurance, by law. On top of that, insurance issued in Massachusetts cannot refuse an applicant because of pre-existing conditions which means that the insurance companies elevate their rates accordingly. Medical insurance is expensive as an individual. If you obtain insurance through an organization such as AAA or NASE the cost reduces because it is generally based on the number of members belonging to the organization but tends to be very basic, often referred to as catastrophic insurance. Insurance is a real concern.

What did you do about your 401K? Could you continue with it?

I decided to leave my 401K with my corporate employer. I could have rolled it over into into an alternative account but I decided not to for the time being. However, without the ability to save on a regular basis on a tax deferred basis there are additional tax disadvantages in addition to the self employed tax mentioned earlier. I decided that opening an IRA was my best bet. This is what I did.

This all sounds very negative. Is there anything good about working for yourself?

I am sure that with time all of the things that I mentioned earlier do get easier. The best thing about working for yourself is the virtual freedom and the knowledge that the harder you work the greater the reward (one hopes). There are a lot of groups out there that can help get familiar with things, even the IRS is somewhat sympathetic and helpful when you have questions, particularly when you are a novice at self employment.

As you can see, becoming self-employed is a decision that takes a lot of consideration and planning. It can be difficult to make ends meet when the costs add up, but if things go smoothly, the benefits have the potential to outweigh the costs you may incur.

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Photo: Jane M. Sawyer

“However, the problem with this is that they are forming the habit of not saving and that habit is very difficult to undo.”

Do you think YOUR money matters? No? Well, sadly, if you don’t care for your finances, your finances may not care for you. Now… or later in life. Lack of controlling your finances puts you one step further away from financial security. Those who have the best chance of financial security are those who frequently (and unfortunately!) spend little time caring for their finances: women and young adults.

So it’s my pleasure to introduce Galia Gichon, a financial planner and owner of Down to Earth Finance. Galia frequently works with women and young adults. I sat down to ask her a few questions about what it means to be young (and/or female) when it comes to knowing, managing, and changing your financial situation.

Galia, your site and services really focus on the financial needs of women. Why? How would you say women differ from men when it comes to financial planning, particularly in the earliest years of their careers?

Even though it is a stereotype, most women do not focus on their personal finances. They achieve so much success professionally, yet most do not take responsibility for their own money: learning about it and taking control of it. Many women do not focus on their personal financial needs until they get married, reach a landmark age (i.e. 35) or have a child. Until then, they don’t really focus on creating solid financial habits. Women do have different financial needs than men because many take an average of 11 years off from working to care for their children or parents and are not adding to their retirement savings at this time. However, they still live an average of 7 years longer than men and therefore need more money for retirement. Plus, when they are contributing to their retirement account, they are still earning less than men (about 22%), therefore, their total savings will be less. Given that they will need more (because of their longer life span), women should focus on planning for their retirement.

What are some common mistakes you see young adults making with their money (male or female)? Generally speaking, how can these mistakes be avoided or solved?

Generally, younger adults do not seeing saving money as a priority. Whether it is in for a simple emergency savings account or towards their 401k or IRA for retirement. They think they can start doing it later. However, the problem with this is that they are forming the habit of not saving and that habit is very difficult to undo. As soon as they start earning any type of money, they should set an automatic savings account. They should start with a small amount so they do not really feel it. They should also sign up for their 401k at work – again with a small amount. Once they start receiving the statements of how much they saved without thinking about it, they will feel excited to save more and in different areas as well.

How important is attitude when it comes to managing your money? How can attitudes hurt or hinder your financial future?

Changing your attitude about your money is concrete to seeing positive changes in your personal finances. Most of the people I work with are able to take charge of their money but the hard part is getting them to realize that they can do it. As a result, many people do not take responsibility for understanding their investments, paying off their debt or even figuring out how much to save for retirement because they do not think they know how to do it or they do not know where to start. By changing your financial habits, especially by adding a positive money conversation in their life on a regular basis (at least once a week), reading the business section of their newspaper, or opening every envelope that comes in the mail, they will start to see positive changes in their financial future. The more they put it off and do not deal with it, thereby, continuing the negative attitude of their money, the harder it will become to deal with it and see their money grow.

Say a client comes to you and says, “I know my problem: I constantly spend too much and am drowning in debt”. Or maybe she’s got another chronic problem that influences her money management. Bottom line, your client needs to change a behavior. How do you recommend clients make long-lasting changes to their behaviors when it comes to managing money?

If a client wants to change their money behavior, I always suggest start by doing one thing different. Just one. It could be reciting a daily Money Affirmation such as “I take the time to manage my money” or I am known and respected for my financial accomplishments as found in My Money Matters. Or it could be completing a five minute task of paying your bills online every week, finding five places to plug in your budget or using all your flexible spending dollars at work. There are over 100 tips like these at “My Money Matters” that can just nudge you towards taking charge of your finances. Once you have increased your confidence and are ready to see monumental changes, you can tackle your budget, learn about mutual funds and plan your retirement with gusto. The key is to slowly build the financial habits so it becomes part of your weekly schedule.

Thanks, Galia! Don’t be left behind. Take charge of your finances today by using tools like Galia’s My Money Matters kit in conjunction with tracking your finances for free here at Geezeo!

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